Elliott Orsillo, CFA

Cfa, registered investment advisor, portfolio strategy
Elliott Orsillo, CFA
CFA, registered investment advisor, portfolio strategy
Contributor since: 2012
Company: Season Investments
Enjoyed the analysis. Any thoughts on why GURU has been able to raise significantly more assets than ALFA? My guess would be a better marketing team and investor appetite for long-only, but I'm really just guessing.
J,
I think that is an excellent question, although I don't have the answer on hand. My partner in crime recently wrote a post entitled "Is Bernanke Blowing A Bubble?" - http://bit.ly/1lb6lFP
The first chart in that post shows that the lion's share of last year's gain in equity markets was due to the P/E multiple expansion.
Thanks mickey99
Thanks Cyniconomics
Yeah...that Russell 2000 P/E ratio on the WSJ page looks way off. Good catch!
Thanks J!
Fred,
All you are really doing is changing the allocation to SPY within VQT since VQT in essence just holds a dynamic weight to SPY and VXX. Your article is basically arguing that Barclays/S&P should have put more weight on SPY when they developed the Dynamic VEQTOR Index based on a very short time horizon that hasn't included a major sell-off. The idea of having a two holding portfolio of SPY & VQT is just as flawed as a single holding portfolio of VQT alone.
Great analysis! Given the projected disparity between net income and free cash flow, do you think the net income side will weigh on the stock since it will drive the more commonly viewed PE vs PFCF? As a side note, pulled the stock up on Ycharts to look at historical PFCF levels and I think you are right on with your analysis. Looking back at the 2004-2007 period when the business was humming along, the PFCF averaged right around 15.
Correct me if I'm wrong, but isn't the bond referenced in your article a convertible bond? In the case of a convertible, "par" is a floating metric since it is tied to the price of the company's stock. Therefore, the only way to assume the yield to maturity is 30% is to assume the stock is trading at the same price next year as it is today. Am I off here?
The back and forth between "contrarianadvisor" and "Dbest1" is some of the best comments I've ever read here on SA. Thank you both for sharing your thoughts.
My two cents...I wonder how you have a "2008 on steroids" scenario with no bailout that dosen't turn into a 1930's depression?
To one of the author's main points, this post explores the idea of productivity being the main determinate of stagflation/inflation - http://ow.ly/pWX0c
Yes, this is typical of any spike in volatility. I'm sure the curve will get nice and steep again once the VIX settles down a bit.
Thanks...appreciate the kind words.
Well written as always and a great point about the abundance of superfluous information.
jova99,
Thanks for that insight! I didn't know that HFT firms were rebated for their flow. That makes a whole lot of sense as to why they trade so much and are so consistently profitable.
Thanks again,
Elliott
I have not specifically heard that statistic but it would make sense since the lion's share of the daily trading volume comes in the first and last 15 minutes of the trading day.
Agreed and well said Ben.
I would recommend using http://bit.ly/P9iF6l to monitor the shape of the curve to monitor decay. The VXX roll cost would be the percentage shown between month 1 & 2. The VXZ roll cost would be the second number listed next to the "Month 7 to 4 contango" box at the bottom. Hope this helps.
Actually, if you click on the link that Brad included to the actual filing it definitely sounds like ARCT IV is getting first right of refusal to any property with a 10+ lease term. Therefore, I think Brad's concerns about the the external management of ARCP are warranted.
Fantastic article...very well written.
That is true over the last couple days.
Ian,
I not trying to make excuses for a bad investment (which this was), but the landscape did shift. The cost of maintaining long exposure to the VIX in the back end of the curve increased 2.5x and has stayed at close to that elevated level since.
Keith, Brad, or uptick_rule_now,
Has anyone looked into the internalization fees that Cole will collect if they go through with their plan (e.g. not selling to ARCP)? I haven't done the research but have heard that the fees are fairly large, which ads another conflict of interest on the Cole side of the deal.
Brad,
As someone who is long ARCP in our client portfolios, this deal is unsettling to me for the reasons you pointed out. The most confusing part of your article is that you recommend that Cole ignore the bully but also state that a 5.2 cap rate is ridiculous. If it is ridiculous (and I tend to agree with you on that point) and Cole really is looking to maximize their shareholder value, then they should take the deal.
Agreed. I think there is some posturing going on with the Cole deal.
I don't think it is "an about face for ARC." They have been shouting for more transparency in the private REIT space since day 1 of their company and they are executing as advertised.
That is really interesting...thanks for sharing!
Seems fairly logical to me, but it probably won't happen because it isn't the European way. I would also venture to guess that bank failures would freeze the credit markets, deepen the recession Cyprus is already experiencing, and put pressure on Cypriot leaders to leave the EMU so that they could devalue their currency and become more competitive. That is an outcome that the Troika does not want to see.
Yes I would.
Thanks for the kind words!
Again, that is only true if you are comparing a one time short of VXX to a one time purchase of XIV. It is not true if you are rebalancing your short exposure to VXX as I've described above. In that scenario, you take on just as much risk continuously shorting VXX as you do buying and holding XIV.
Thanks for the question. I'm implying that they will diversify their exposure to said fiat currencies by using them to purchase hard assets like gold.
Just found this article and think everyone is missing the major point. The difference in long XIV versus short VXX has everything to do with the daily exposure reset. Comparing a buy-and hold XIV position versus a one-time short of VXX, such as the workurts1's statement above, is comparing apples to oranges (both fruit but very different).
If one were to daily reset their exposure to being short VXX, their return stream would match (or at least be very close to matching) that of XIV. As an example, let's say I fund an account with $10,000 and short $10,000 worth of VXX. My account would then show $20,000 in cash ($10,000 from my deposit and $10,000 from the short proceeds) and a negative $10,000 position in VXX for a net worth of $10,000. Now let's say VXX drops 5% the first day. The value of my account is now $10,500 ($10,000 + $10,000 - $9,500) of which $1,000 isn't "working for me" because it isn't backing any underlying short position. If I were to short another $1,000 worth of VXX, then I would be back to "fully invested." I would now have $10,000 from the initial deposit plus $10,000 from the initial short plus $1,000 for the new short ($21,000 total) minus $10,500 in short exposure to VXX for a total net worth of $10,500. The value of my account is the same as before I re-upped my short but my exposure is different (100% exposed versus 90% exposed). I have essentially pressed my short bet on VXX, which is exactly what XIV does every day.
The reason that a VXX short looks like a safer play over long periods of time is because you end up with less and less exposure over time if you only make a one-time short and never re-up your bet. If you did this, then after a while you would be left with an account that is 99% exposed to cash and 1% exposed to short VXX, which doesn't even come close to comparing to the exposure embedded in XIV.
My opinion is that either strategy is valid and one isn't better than the other. It all depends on what you are trying to accomplish and the exposure you want from your investment.